Do the local government workers own your house?

And the unions ended up owning Chrysler!

I totally agree with you. However, the main problem here is where do you live. All states in this area have the same problem. And NYC has had lower property tax rates than the outlying areas. So, NYC is more prone to raise the taxes with a minimal impact on purchasing habits for most people. Personally, I know that I will be paying for these unfunded liabilities for the next 30 years and do not want to buy as I can't predict what these increases are going to be. Additionally, the increases will not be only in prop. taxes, but in state and NYC income taxes, which are already fairly high.

http://www.businessinsider.com/us-pensions-funds-have-1-trillion-funding-hole-2010-2

interestingly, as of 2008 New York was one of only four states that had fully funded pension systems. i doubt that's true today. Florida, Washington and Wisconsin were the other three.

"The cost to live in the house will be just taxes and maitenance."

and market rents might not fully cover the landlord's carrying costs. how much ownership you feel you have when you get taxed for "holding" the stuff that you in theory own? now add to that 0 control on that tax and the certainty that they will spiral out of control. bottom line: most home"owners" are dual renters (from the government and from the bank).

do people htat live on RVs pay property taxes?
http://www.nytimes.com/2010/02/18/us/18campers.html?em

> do people htat live on RVs pay property taxes?

If they don't own any land, no.

aboutready: The fundamental issue is that what is considered full funded by the accountants? Very frequently, the healthcare costs are underestimated. Also future life expectations are too low. In addition, the issue is not as much state but the municipality workers.

Sideline: I see your point, but the argument I am making is that all property prices will go down. Due to obligations to municipal worker, property taxes will increase the most. Cops retiring at 50 with 150% of the last salary as pension (pensions are determined by salary plus overtime in the last few years).

" Personally, I know that I will be paying for these unfunded liabilities for the next 30 years and do not want to buy as I can't predict what these increases are going to be."

Right.

Because property taxes have absolutely no effect on RENTERS.

AR: fully funded cause they aren't forced to account for health care benefit costs. the city is fully unfunded on both sides.

"Personally, I know that I will be paying for these unfunded liabilities for the next 30 years and do not want to buy as I can't predict what these increases are going to be. Additionally, the increases will not be only in prop. taxes, but in state and NYC income taxes, which are already fairly high."

totally agree!!! but big tax increases tend to gravitate towards what doesn't move (fixed property) instead of capital and labor. the last 2 move around, so politically the rates might go up without the increase in revenue expected. property is the easiest to get increase revenue from by increased taxation.

300, you see no chance at all of reducing pension benefits to current retirees? don't you think that private sector voters might end up organizing themselves (cheaply, through internet) to vote against public sector burden? not to the point of a tea party maybe, but even that is already happening.

> Because property taxes have absolutely no effect on RENTERS.

not on many rent stabilized and to a lesser extent in the sense that renters consume much less housing than buyers (it's common to rent a smaller place than what it would be ok for buying purposes). if vacancy rates go up and the employment picture keeps on getting worse, landlords cannot pass all their costs to renters. they are happy covering some of those carrying costs.

aren't the accountants clever?

> Because property taxes have absolutely no effect on RENTERS.

Only in that folks afraid of buying will join the rental pool.

But rising taxes will kill the landlords... they CAN'T pass along increases if the market doesn't bear it.

Supply/demand will dictate prices, not the landlord's financial situation (unless its so negative they're going belly up and have fire sales).

I agree that it is not possible to redude the benefits. The only way is to default on the debt first and restructure the pension obligations. No democrat and to a lesser extent republican politician wants to do that due to union votes. In addition, the home values take a big immediate hit which makes the homeowners agree to tax increases even though in the long run it is detrimental to their property prices. The issue is that rich people are always outvoted by the govt and muni workers.

Right now, if you take rents and subtract out taxes, mainentance, and insurance, you get something like a 2% net yield. This number used to be something like 6% a decade ago. While irrational, the market doesn't seem to care too much about this number getting squeezed. Even if taxes outpace inflation by a factor of 2 over the next 30 years, the net yield will be affected by less than 1%. Meanwhile, we've seen the number get squeezed 4% without the market so much as flinching.

Do you think the market is really considering such things at the moment? You're talking about a "maybe" that would affect fundamentals by a fraction of what is already way out-of-whack. A drop in the proverbial bucket...

somehow inonada you are assuming that the net yield will stay on positive territory. why is that?

but i see your point inonada, restricting the deductibility of mtg interest to those under $250k/year will affect prices in the metro area more than predictable property tax increases each year from a somewhat low base.

inonada: Good point. Low yields suggest the people are expecting property prices to increase. This type of bubbles burst when the reality hits home. I am suggesting that increase in the taxes will be the tipping point. Once people realize the property prices are not going up, they will not have any reason to buy.